Business Plan MVNO Project Final Presentation

MVNO Business

Business Plan

Agenda
MVNO fundamentals About MVNO Wireless service delivery chain MVNO Business models Why MVNO Indian market analysis PEST Porter five forces Analyzing MVNO opportunity in India Our MVNO business model Our business strategy MVNO opportunity framework MVNO marketing strategy targeting, positioning MVNO strategy implementation price, product, place and promotion Financial analysis MVNO business risks

MVNO FUNDAMENTALS

About MVNO
A MVNO is a type of mobile operator which offers voice and data services without owning any part of the network infrastructure. MVNO typically "rent" both the access network and the transport network - the mobile spectrum, from traditional mobile network operators and provide services under their own brand name.

Wireless service delivery chain

user

MVNO Business models

MNO

MVNO

MNO

MVNE

MVNO

MNO

MVNO

MVNE MNO BRANDS

Why MVNO

Why MVNO

INDIAN MARKET ANALYSIS

PEST
POLITICO LEGAL ENVIRONMENT - Politically stable country. - FDI allowed up to 74% for foreign players in telecom sector - Availability of cheap and professional labor - Weak consumer protection laws - Increasing recognition of the potential in the retail space by the government. ECONOMIC ENVIRONMENT - 6 million new subscriber every month; growth is projected at 23% until 2012. - Current tax structure imposes a tax of 17-26% on telecom players - The Monetary policy aims to contain inflation close to 5.0%. - Consumer confidence is high and encouraging.

PEST
SOCIAL ENVIRONMENT - 215 millions people between the ages of 14 years 25 TECHNOLOGY ENVIRONMENT - Large number of technology players and workforce. - Consumers are receptive to technology. - High demand rural India. - Growing middle class and youth with an increasing propensity to save. - Changing attitude- live for today

Porter s 5 forces
Buyer Power: High ‡Buyers demanding greater variety at lower prices. New entrants Threat from New Entrants: High ‡Growing subscribers base ‡Presence of infrastructure ‡ Numerous foreign players are interested to enter. Increase in FDI will allow foreign players

Buyer power

Competitive rivalry

Supplier power

Competitive Rivalry: High ‡Margins are small around 4% ‡ High competition is driving down voice ARPU . Threat of substitution: Low ‡No strong demand for fixed line ‡Little awareness about VOIP applications

Threat of substitution

Supplier Power: Moderate ‡Handset suppliers have strong brands e.g. Nokia, Samsung, LG ‡ Large MVNO are able to push cheaper brands

ANALYZING MVNO OPPORTUNITY IN INDIA

Our MVNO business model
Network Billing and VAS Back office Offer devlopment Brand and distribution

Branded reseller Thin MVNO Full MVNO MVNE
MNO MNO

MNO

MVNO

MVNE

MVNO

MNO

MVNO

MVNE BRANDS

MVNO Business Strategy
Low CAPEX and OPEX for first few years. Low fixed expense and high variable expenses. Align with MVNE for infrastructure needs. Buy cheap handsets from supplier such as Olive. Sell handset at slightly higher price to cover acquisition cost. Prevent cannibalization of MNO customers.

MVNO opportunity framework
DEFINITION OF THE TARGET MARKET CUSTOMER SEGMENTATION TARGET CUSTOMERS CUSTOMER POSITIONING PRODUCT PRICE PLACE PROMOTION

VALUE PROPOSITION

STRATEGY IMPLEMENTATION

REGULATORY AND OPERATIONAL ANALYSIS
REGULATORY RISKS OPERATIONAL RISKS

FINANCIAL ANALYSIS

ARPU ANALYSIS WACC OPEX/CAPEX

MVNO Marketing Strategytargeting
TARGET SEGMENT
Retailer MVNO Low income and credit

MVNO OFFER
Simple prepaid Focus on voice and SMS Quadruple play bundle Focus on convergent offer Voice and data bundles Focus on premium content (music, gaming, sports, etc) Voice and data bundles Focus on competitive music OTA downloads Corporate packages Focus on enterprise applications Simple flat rate Simple pricing plans

Cable MVNO

Mass market (cable households) Heavy users of mobile data

3G centric MVNO

Music centric MVNO

Music fans

Enterprise focussed MVNO Demographic focussed MVNO

Medium to large enterprise

Focussing on unique needs of demographic

MVNO Marketing Strategy
TARGET CUSTOMER Urban youth: Distinct mobile needs More and longer out-bound voice calls Big calling circles for both making and receiving calls Large users of SMS Both the earliest adopters and highest users of valueadded services Higher usage for both voice and SMS at weekends High demand for upgrades Price sensitive

MVNO Marketing Strategy positioning

VALUE ADDITIONS NO FRILLS

LOW PRICE

HIGH

MVNO Marketing Strategy
POSITIONING VALUE ADDITIONS ‡ Free in-network calling (CUG) ‡ Personalized customer care ‡ QWERTY handset at low prices .

NO FRILLS ‡ Low prices & basic services ‡ Simple rate plans. ‡ Easy to understand

MVNO Strategy Implementation
FLAT PRICING - 8.9$ (per month)
First 300 mins in network outgoing free. Free incoming After 300 mins call charges 0.025 $/min. Out of network call charge 0.04$ One month validity First 300 mins in network outgoing free. Free incoming After 300 mins call charges 0.018 $/min. Out of network call charge 0.04$ Free data plan up to 100 MB After 100Mb 0.05$/Mb

Prepaid Voice

Postpaid Voice

Prepaid Data

Free data plan up to 100 MB After 100Mb 0.06$/Mb

Postpaid Data

MVNO Marketing Strategy
PRODUCT
Vodafone Campus Pack Talk and SMS @ 0.002$ Buy the Vodafone Campus Pack worth $2.2 with 2 years validity ‡ ‡ ‡ ‡ ‡ ‡ Calls to 5 local Vodafone numbers @ 0.002$ / min Local SMS @ 0.002$ Calls to local Vodafone mobile phones @ 0.01$ / min Calls to other local mobile phones @ 0.02$ / min STD calls @ 0.03$ / min Existing Campus Pack subscribers can also opt for the new tariff by doing a recharge of $1

MVNO Marketing Strategy
PRODUCT
Data plan includes ‡ ‡ ‡ ‡ Internet for emails, surfing Chatting applications within network (CUG). SMS Campus applications ± Calendar application for class and event schedules, announcements

MVNO Strategy Implementation
PLACE Initially the service is rolled out in two Indian metros Delhi Mobile customer base 12 millions Mobile customer base 13 millions

Mumbai

The channels we are going to use for distribution will be: Retail stores (Big Bazaar) Small shops Bank ATM Self service through SMS recharging

MVNO Strategy Implementation
PROMOTION Promotion at places where youth shop such as Shopping malls Movies theater School campuses Imaginative, eye-catching advertising & PR

MVNO Financial analysis
ARPU analysis Postpaid Voice Average call rate/min (within 300 mins) = 0.013$ Average call rate/min (after 300 mins) = 0.018$ Assuming that 90% customers stay within 300 mins and 10% customers talk more than 300 mins Average call rate/min = 0.9*0.013+0.1*0.018=0.0135$

MVNO Financial analysis
ARPU analysis Postpaid Data Average rate/Mb (within 100 Mb) = 0.033$ Average rate/Mb (after 100 Mb) = 0.05$ Assuming that 95% customers stay within 100Mb limit and 5% customers exceed more than 100 Mb limit Average $/Mb = 0.95*0.033+0.05*0.05=0.03385$

MVNO Financial analysis
ARPU analysis Prepaid Voice Average call rate/min (within 300 mins) = 0.013$ Average call rate/min (after 300 mins) = 0.025$ Assuming that 90% customers stay within 300 mins and 10% customers talk more than 300 mins Average revenue/min = 0.9*0.013+0.1*0.025=0.0142$

MVNO Financial analysis
ARPU analysis Prepaid Data Average rate/Mb (within 100 Mb) = 0.033$ Average rate/Mb (after 100 Mb) = 0.06$ Assuming that 95% customers stay within 100Mb limit and 5% customers exceed more than 100 Mb limit Average $/Mb = 0.95*0.033+0.05*0.06=0.03435$

MVNO Financial analysis
ARPU analysis (per month)
VOICE (Per min) POSTPAID PREPAID 0.0135$ 0.0142$ DATA (per Mb) 0.03385$ 0.03435$

Assuming 75% postpaid customers and 25% prepaid customers ARPU = 0.75*(0.0135*300+0.03385*100) + 0.25*(0.0142*300+0.03435*100) =7.5$ => 90$ (per year)

MVNO Financial analysis
Other analysis (Click link)

Microso t cel orksheet

MVNO Financial analysis
Lifetime value

M LTV !  AC 1 r  i
- AC - r - i - M Acquisition cost 11.0$ 93% Average retention rate Interest rate 8% 26.7$

Margin customer generates in year

- LTV = 167$

MVNO Business Risks
OPERATIONAL RISKS Wholesale capacity pricing policy Concern about subscriber data

REGULATORY RISKS Foreign direct investment in MVNO Limits on MNO investing in MVNO Tax structure on profits

MVNO Business Risks
OTHER BUSINESS RISKS Mobile number portability Higher churn rate -> Higher customer acquisition costs. Negotiation with education institutions to offer VAS.

MVNO Business Opportunities
Future business opportunities Fully functional MVNO in 5-10 years. Provide differentiated mobile value added services (m-VAS) Future business opportunities Enterprise MVNO

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